CIMA P3 Syllabus C. Internal controls - The role of information systems in organisations - Notes ^{13 / 21}

There are 2 main roles of information system in organisations

1. Support operations through the processing and storing of transactions

2. Support managerial activities such as a decision making, planning, performance measurement, and control.

Purposes why Organisations require information:

1. Recording transactions

2. Decision making

3. Planning

4. Performance measurement

5. Control

Recording Transactions

Information about each business transaction or event is required for a number of reasons:

• Documentation of transactions can be used as evidence in a case of dispute

• There may be a legal requirement to record transactions, for example for accounting and audit purposes.

• Detailed information on production costs can be built up allowing a better assessment of profitability

Decision making

• Information is required to make informed decisions

• Information used by information systems may be classified as internal and external

Planning

• Planning requires a knowledge of available resources, possible timescales for implementation.

Performance measurement

• Overall performance must be measured in order to enable comparisons against budget or plan to be made.

• This may involve the collection of information on:

  - costs
  - revenues
  - volumes
  - profitability

• This collection, analysis and presentation of such data can be performed by information systems

Control

• Once a plan is implemented, its actual performance must be controlled.

• Information is required to assess whether it is proceeding as expected or whether there is some unexpected deviation from  the plan.

• Information systems can be used to monitor and control the outcomes of plans.